Retailers and brands are standing on the verge of a veritable mobile payment revolution as mainstream interest and unprecedented ease-of-use drive adoption among consumers. Barriers to entry for retailers wishing to add mobile payment apps to their point-of-sale systems have also been lowered to the point that they are almost non-existent thanks to innovative new technology.

While I agree with much of what a recent article on this site stated in terms of constraints associated with retailers wishing to enable mobile payments, there are some key points that were overlooked.

How smart companies overcome constraints

As companies such as Apple have shown, overcoming constraints is not always a head-on process; in other words, you don’t simply remove constraints by investing time and energy on overcoming them.

Instead of taking on the music industry head-on by selling physical CDs and DVDs, Apple created an entire new ecosystem with iTunes to support its iPod devices. When time came to take on BlackBerry in the smartphone market, it didn’t offer better security and faster email; instead, it changed the way we view phones by again creating a new ecosystem that enabled the smartest developers in the world to build a slew of powerful, useful apps.

By enabling smart people to do what they do best, Apple became one of the world’s most successful, profitable and innovative companies.

What’s holding retailers back?

Retailers have faced a number of constraints in their attempts to drive adoption of mobile payments, but chief among these has arguably been that smart developers can’t simply create world-class apps that easily integrate with a retailer’s point-of-sale.

The main reason has been that too many people have tried to carve out areas of exclusive access: You can use my wallet, but only if you’re a customer of the bank I’ve partnered with, or only at the retailers in my limited stable. Consumers have reacted to this the same way they react to everything that makes their lives more complicated instead of simpler: By quickly getting bored and moving on to something else.

Every day, we see new transaction apps in the market that have the potential to simplify life for consumers and add value for retailers in the form of offering new ways of distributing coupons, vouchers and rewards or enabling mobile payments or mobile money transfers.

The barrier for these apps is that they require integration with the point-of-sale (POS) system to allow transacting at the POS. It simply isn’t feasible for every retailer to individually enable every app at their POS, no matter how wonderful these may be – changing anything at the POS is just too complicated, time consuming and expensive.

Enabling any transaction type at the retail POS

Over the past year, something has shifted in the mobile payments and transactions space. Mobile banking has exploded – ten million South Africans are actively using it. Despite constraints with feature phone functionality and perhaps partly due to low smartphone penetration, the market is mainly among those with extremely limited access to conventional banking services. They are using USSD technology on the most basic of handsets, checking statements and balances and buying airtime.

In addition, key players in the Tier 1 and 2 retail POS environments have also rapidly adopted an open and interoperable platform that allows them access to any mobile transaction or currency type through a single integration. At more than 40 000 POS lanes in South Africa, retailers can now accept mobile payments, process phone-based vouchers and coupons and enable any type of mobile transaction using wiPlatform. By providing an interface between POS systems and third party mobile transaction service providers, the platform has enabled a burgeoning ecosystem and opened up a new world of possibilities for retailers and consumers.

Retailers can now give access to value-add applications developed by innovative brands without being distracted from their core business. Consumers can expect to benefit from a smarter shopping experience driven by POS-integrated apps and campaigns. Retailers are already seeing the benefits in terms of increased sales, better customer retention and a competitive edge over peers.

A timely article, given the continuous growth of mobile,
especially the proliferation of smart phones over feature phones (MTN year-end
earnings report indicates 7.3 million smartphones on their network alone, and
14.3 million data users), and in areas generally targeting lower LSM
consumers. Two events are happening in
South Africa that will see an even deeper penetration of smartphones; firstly,
if ICASA have their way and the interconnection fees between network providers
are indeed reduced, this should (could/would?) have a knock-on effect in
reducing current call rates even further. Secondly, with the new Android smart
phones being produced locally, at a cost of roughly R2300 for the larger 5-inch
model, and R1200 for the smaller 4 inch model, we can see these figures
increase rapidly, pushing up smartphone penetration even further.

Also, the word “retailer” or even “etailer” is fast losing its
meaning, as these almost certainly only point to either traditional
brick-and-mortar stores, or their associated online equivalents. We need to
look at China in order to appreciate how, in this the year of the Horse, China
is poised to become the largest superpower in ecommerce, and observe what they
are doing to achieve such a status, and what are the key enablers.

The most important of these observations are the advances being
made in the development of digital banking (bank in the hand). This is acting as a catalyst, sharpening the appetite
and ability to be able to purchase anything and everything online. Taobao has
created a safe and cheap option for everyone to be buyers and sellers in a
digital market place, and this has a massive, positive impact on the informal
sector as they can now trade and accept card payments on the street.

The other important key enabler that is fueling the rise of
ecommerce in China is its low cost, dynamic supply chain. Products are delivered
swiftly with little or no cost to the consumers, and, given that time is money
and not everyone has time to visit stores, is helping ecommerce become the
nationwide norm. Again, this could give rise to the (massive) growth of the
informal sector in South Africa, and claim an all-important stake in what has
been, until now, the domain of the haves.